Thursday, March 09, 2006

Peak Oil and Deep Oil, part II

NEWS FLASH: "The concept of Peak Oil has not been widely written about. But people are talking about it now. It deserves a careful look -- largely because it is almost certainly correct." -- The New York Times, March 1, 2006

"Almost certainly correct," states the Old Gray Lady. That is about as close to a ringing endorsement as you will ever see in the daily diary of Manhattan dreams. If you have been reading my articles about Peak Oil in Whiskey & Gunpowder, you have been, both literally and figuratively, ahead of the Times. At least you have been ahead of The New York Times. As the reference at the top indicates, Peak Oil is now part of the worldview of the mainstream media. Can 60 Minutes be far behind? Better late than never.

This is not an occasion to gloat. Peak Oil would have been a reality with or without me. For the past two years, I have been merely a humble messenger of Mother Nature. And as a wise preacher once said to me, "God does not choose only those who are worthy. He makes worthy those whom He has chosen." So as we collectively strive for worthiness, dear readers, each of us will have to figure out how to deal with Peak Oil in our own particular circumstances in the coming years.

But if you have been reading what I have been writing in Whiskey & Gunpowder, and if I have given you any semblance of a head start in coming to grips with the phenomenon, you can thank Bill Bonner and Agora Financial. These latter two entities have been paying the bar bill, if not the freight, for Whiskey to be delivered to your e-mail box at no cost to you. Thanks, Bill. (And thank you Greg Grillot for your able assistance in the engine rooms of the Whiskey distillery.)

Back to Business

In Part I of this article, I addressed the comments of a number of readers who ranged from being skeptical of the entire Peak Oil thesis to merely curious about the possibilities of an "abiotic" origin for oil and gas in the crust of the Earth. These were just a few of many e-mails, so it is clear to me that our Whiskey & Gunpowder readers are looking at a wide range of articles on the subject. While we wait for The New York Times to catch up, and if you want to know more, we are glad to oblige.

A reader named Julian, from the beautiful city of Vancouver, British Columbia, had this comment:

"I have been following your articles on the history of the oil industry and Peak Oil, and I read a lot of other material on different Web sites. I have to say that I still believe there is some substance to the theories of how oil forms at depth within the Earth. [But I] studied economics and mathematics in college, not geology. So please help me out. I am trying to make sense of the arguments."

OK, Julian. Let me use some analogies with which you might find familiar.

Mantle Plumes and Hot Spots

If large quantities of hydrocarbons were originating within the deep Earth, as the "abiotic" oil theories suggest, then let me ask the next question: Is there any significant amount of oil and gas associated with places where the surface of the Earth is closely connected with the Earth's deep interior? Let me illustrate this with reference to a couple of famous geologic "hot spots" on this planet.

There are no oil seeps in Hawaii, nor in Yellowstone Park, for example. In both of these very fascinating places (and there are many more on the face of this Earth) there is what is called a "mantle plume" or a hot spot straight down beneath your feet. That is, the "hot spot" is an essentially vertical corridor in the crust of the Earth.

Through this corridor, rock is being heated to a molten state and pushed toward the surface, directly up from the Earth's mantle or at least from the base of the crust. In other words, in places like Hawaii and Yellowstone, you have a very "shallow" connection between the surface of the Earth and its hot, molten interior.

In Hawaii, you have the great basalt volcanoes, particularly what we see today on the Big Island of Hawaii. These volcanic vents on Hawaii are connected directly to the deep Earth, from which comes the heat energy that melts the rock into molten lava that you have probably seen in videos, if not in person. (And believe me, it is very impressive if you are up close and personal.)

As you move to the northwest from the Big Island, the other islands of the Hawaiian chain are older, have eroded down over millions of years, and have settled downward into the Pacific tectonic plate. Still, these islands too are remnants of volcanism that originated in the deep Earth above the hot spot. So where is the oil and gas? The answer is that there is none. All you see in Hawaii is a heck of a lot of magnesium-iron basalt, with very minor amounts of carbon dioxide and trace amounts of methane being detected in occasional lava flows. I talked about the origin of the trace amounts of methane in Part I.

In another example, Yellowstone Park sits atop an immense volcanic caldera, meaning a volcanic crater of immense size. The Yellowstone caldera is about 40 miles by 50 miles in surface dimension, more or less. And out of this caldera has poured, over many millions of years, many massive series of volcanic flows.

Technically, the earliest flows are called basalt, similar to the rock type that we find in Hawaii. Later flows were a rock type called andesite, named after the kind of rock that is common in the great Andes Mountain chain of South America. (This phenomenon is closely related to what is called "seafloor subduction.")

And the most recent volcanic flows at Yellowstone were a rock type called rhyolite, which is chemically equivalent to granite, except that granite is what you get if the rock cools and crystallizes at depth. That is, in a few million more years, the subterranean source of this molten material at Yellowstone might cool to become what we call granite. Then again, Yellowstone could also erupt upward in one of the largest volcanic explosions in geologic history. We will just have to wait and see. And maybe you will even read about it in The New York Times, if you are patient.

But what we do not find in Yellowstone is oil or gas. Despite the connection to a "hot spot" in the Earth's crust, there is nothing that even remotely could be called an oil or gas deposit. And the best science is that whatever is down under the ground at Yellowstone will never become oil or gas.

Oil From Russian "Super Wells?"

A reader named Thomas, from New Mexico, e-mailed as follows:

"I have seen Web sites that discuss 'super wells' in Russia. The Russians drilled many miles into the Earth, and found large quantities of oil and gas. Isn't this evidence of oil forming deep in the Earth?"

If you follow the lead of Thomas and perform a Web search for "super wells" or try the term "Peak Oil scam," one of the sites you will find refers to a number of Soviet and, later, Russian wells that were supposedly drilled to depths of 40,000 feet and more. If the Russian drill bits penetrated this far, it was first and foremost a truly remarkable technical achievement.

That depth approaches the bottom of the Earth's crust in parts of Russia, and may even get into the upper mantle. What did the Russians find? Good question. The Web sites claim that these are some sort of Russian "super wells" that produce immense quantities of oil. Supposedly, this is why Russia is one of the leading oil producers in the world today, rivaling Saudi Arabia in total daily oil output.

In all candor, we in the West know surprisingly little about these deep Soviet and Russian wells. During the Cold War, the Soviets diverted a significant amount of resources to drilling a number of very deep wells. The details of these drilling projects were considered a state secret, although there was good evidence that the Soviets were attempting to do exactly what one might think. That is, they wanted to discover what were the types of rocks in the stratigraphic column beneath the drill rigs. This kind of stratigraphic information would normally be useful for both geological research and further geophysical prospecting.

There was a school of geological thought in the Soviet Union that did buy into the "abiotic" theory of the origins of oil. This was, in no small measure, because one of the originators of the "abiotic" oil theory was the great Russian chemist Dimitri Mendeleev, of whom I wrote in Part I of this article.

There were rumors in the geological community, as well as in the Western community of defense analysts, that if the Soviet deep wells encountered any significant hydrocarbon resources, they would use nuclear explosions to shatter the rocks and increase the flow of any oil or gas to the well bore. This would really have been "shooting the well," which I discussed in a Whiskey article last November. Did the Soviets ever find oil, let alone nuke a well? Not that we are aware.

Another thing that we know is that most former Soviet, and current Russian, oil production has come from giant oil fields such as Samotlor and Romashkino. These are conventional oil fields, with well-understood geological control over the oil, such as identifiable source rocks, host rock formations, and structures and other traps that contain and confine the oil in places where it can be accessed by drilling. The origins of these identified oil fields have nothing to do with deep Earth, "abiotic" genesis.

When the Soviet Union collapsed in the early 1990s, oil production in Russia collapsed as well, for reasons entirely related to the then-prevailing unstable economic and political conditions. This decline in political stability, economic conditions, and total oil and gas production caused great hardship in Russia, and directly led to significant personal hardship to many of the Russian people.

There were no "super wells" to come to the rescue of the Russians from the collapse of their previous governing system, or their mismanaged economy. Hint: There is a lesson in this for the West in general, and for America in particular.

In the past decade or so, Russian oil production has recovered to some extent, but for reasons that have nothing to do with "abiotic" oil and everything to do with investing big chunks of capital in new conventional drilling projects for oil wells.

All of the increase in Russian oil production appears to be from known and conventional, if not mundane, geological sources. That is, there are no known deep Russian "super wells" producing "abiotic" oil or gas from the base of the Earth's crust or from the top of its mantle.

And looking forward, through a process called "Hubbert linearization," which I have discussed in other Whiskey articles, it is apparent that Russia is about to enter its own version of Peak Oil. That is, based upon the production trends from its oil fields, Russian oil production is on the verge of a significant, irreversible decline. Some analysts are predicting a rather precipitate collapse in Russian oil production over the next 10 years.

Even in the post-Soviet era, the contemporary Russians are taciturn about the purpose, let alone the output, of their known deep wells. One thing that we know for certain is that there are no massive pipeline systems around these wells.

Pipelines would ordinarily be necessary to move any large amounts of oil away from the hole in the ground. But considering the depletion rates and rates of decline in production from Russia's conventional oil fields, if there are any "super wells" in Russia, they had better get them hooked up and pumping pronto.

So are there "super wells" in Russia? Don't bet on it.

Precambrian Oil From Vietnam?

A young student named Amelia from the Philippines sent an interesting e-mail that touched on these types of arguments as well. Amelia said:

"Just offshore Vietnam is a big oil field in the South China Sea. The field is producing large amounts of oil from Precambrian rocks, more than 1 billion years old. If, as you have said in your articles, oil is of more recent origin than the Precambrian Era, how do you explain this? Hasn't the oil been in these Precambrian rocks for a long time? Or could the oil be coming up into the Precambrian formations from deeper sources?"

First, it is wonderful to know that people in the Philippines are reading Whiskey & Gunpowder. At Agora Financial, we know that the bulk of our audience is in North America. But we like to think that we write articles for people to read everywhere, and certainly whomever and wherever they happen to be. Thank you for reading, Amelia, and many thanks for writing!

This is a great point from Amelia. Her question embodies much of the argument of the deep Earth hydrocarbon side of the "abiotic" oil debate. If there is oil and gas of deep Earth origin, it must be migrating upward into the crust, where it is trapped by other geological controls. And it may have been doing so for a period of time that could reach back into the Precambrian Era. So what about this Vietnamese oil field in the Precambrian rocks?

To reach the best understanding, we will have to discuss some geology. The region to which Amelia refers, offshore southern Vietnam, lies beneath the relatively shallow, and utterly beautiful, turquoise-blue waters of the South China Sea. Despite the present flat appearance, this area has a very complicated and truly complex geological history. The rock sequence in this area has at its basement Precambrian rocks that are, as Amelia mentioned, more than 1 billion years old. (Technically, they are called granulites and gneisses.)

Geologists who have studied the area believe that during the Paleozoic Era (Cambrian through Permian periods, about 550 million to 250 million years before present), this chunk of the planet was part of an ancient, exposed continental landmass. It would be similar to what we see today in northern Canada or northeast Brazil, where vast expanses of Precambrian Shield are exposed at the surface.

During this period of time, the exposed Precambrian surface was heavily weathered, and eroded down by the elements of that time. There are few, if any, sediments of any time frame of the Paleozoic Era on top of the Precambrian basement rock that is offshore Vietnam.

The rock record suggests that the region that is now offshore Vietnam began to submerge during the Jurassic Period (about 210 to 160 million years ago), due to subsidence of the Earth's crust. Thus did this region begin to accumulate deposits of sedimentary rocks.

This subsidence and deposition of sediments continued until about 65 million years ago. So the rock record is that this area had about 150 million years of geological history during which to accumulate sediments, which formed into a wide variety of different kinds of rock formations.

As these sediments were accumulating so many millions of years ago, in what would become the area offshore Vietnam, to the north, there was an episode of what is called "mountain building." That is, from southern China to southwest Borneo, an ancient mountain range was being pushed upward by forces associated with plate tectonics.

These rising mountains were the source for much of the sediment that poured into the area in which we are now interested. This mountain chain was similar to what we see today in the Andes, for example.

During all of this geological history, the Precambrian rocks, and the much younger sediments above the Precambrian basement, were intruded by deep magmas that were working their way up from the bottom of the Earth's crust, if not the upper mantle. At the surface of the Earth, one would have seen extensive volcanism, again of the type associated with what we see today in the Andes Mountains.

After a very long and complicated sequence of geological events, the volcanism halted about 60 million years ago. The area began to submerge again, as the crust of the Earth subsided, resulting in more sediment deposition up to the present day.

There is absolutely solid evidence that the rocks in which the Vietnamese hydrocarbons formed were rich in algae and were, in fact, the equivalent of an oxygen-poor lake environment. As the algae-rich sediments were buried and subsided over time (Oligocene to Miocene epochs, about 35 to 10 million years ago), the organic matter in the rocks began to transform into what we see today as oil and gas. Later in the sequence, the sediments that were laid down in late Miocene time created a very tight shale "cap" on top of the entire rock body, sealing the hydrocarbons beneath.

So here is what we have today. There are relatively young Miocene-age (20 to 10 million years) sedimentary rocks lying above folded sedimentary rocks of Jurassic age. These Jurassic sediments were intruded by later magmas (technically, called granitoids). And all of it lies atop fractured basement rocks of Precambrian age.

Complicating the geology of the area, the rocks beneath the waters offshore Vietnam are crossed and broken by numerous faults, or relative Earth movements. These faults and fault systems are among the most complex one will find in any oil province in the world. Over long periods of time, the faults have opened and closed, and moved one way and then the other.

This relative movement has occurred several times during various tectonic episodes. That is, the faults have been compressed and then extended. They have compacted due to differential loading of sediments above them, and then decompacted due to erosion of the sediments. It takes a lot of very good geology and geophysics just to begin to understand what is going on. And then you have to drill for oil and find it. It ain't easy. And it is not for amateurs.

The petroleum in the offshore area of Vietnam is thus of Oligocene and Miocene age, and it originated in very much biological fashion. One can actually trace the oil from its current reservoirs, back to the source rocks that are located only a few dozen miles away at most. As things happened, the oil migrated from the Miocene rocks where it originated, and is now filling the available fractures and pores in, among other rock formations, the Precambrian basement.

So Amelia correctly noted that the waters offshore Vietnam are producing oil from Precambrian rocks. But what Amelia did not understand is that the oil originated relatively recently in geological history and migrated into the far older Precambrian rocks, as well as into rocks of Jurassic age.

Today, there are seven significant oil fields located offshore Vietnam, with estimated reserves of almost 2 billion barrels of oil. Much of the oil that is being lifted from these fields comes from granite-like Precambrian rocks. But the oil is not "abiotic," and it did not form in Precambrian time. The best science is that the hydrocarbons from the Vietnamese waters originated in the algae-rich, oxygen-poor lake beds of Miocene time.

Wrapping It All Up

So I hope that I have cleared up some of the questions about the "abiotic" theory of oil formation. If there are more questions, you might try reading The New York Times. But then again, the Times is kind of just waking up on this issue, so please send your questions to your Mesozoic managing editor here: greg@whiskeyandgunpowder.com

Meanwhile, let me make one final point of interest in all of this. The algae-rich, oxygen-poor lake beds of Miocene time in the part of the world that is now offshore Vietnam were quite similar to the environment in which the so-called "oil shales" of Utah and western Colorado originated.

The big difference is that the oil offshore Vietnam has had more of what is called a "thermal history." That is, the organic material has been, in essence, buried, heated and "refined" within the crust of the Earth such that it has become a valuable grade of petroleum -- whereas the oil shales of the U.S. West are still rather "undercooked."

Chemically, the "oil" in the shales of the American West should be called "kerogen." This is a type of substance that could have used a few million more years of burial, subsidence and thermal history. Had this occurred, the kerogen would probably have been upgraded to a lighter, more valuable, and easier-to-produce form of oil through the input of what I call the "tectonic energy" within the Earth. I will discuss this in other articles in Whiskey & Gunpowder.

The United States is certain to develop and utilize its kerogen resources one of these years. My colleague Dan Denning has reported extensively on a project in western Colorado that is being sponsored by Shell Oil Co., and using some very innovative technology to produce kerogen and upgrade the product to a type of fuel oil.

But even in the best of circumstances, the United States is just plain decades behind where we, as a nation, need to be. America will not see more than a few thousand, and token, barrels per day of "oil from shale" for many more years.

Meanwhile, the Earth's reserves of conventional oil are depleting. Prices are climbing, with allowance for day-to-day market fluctuations. And the new Cold War of the future is already in progress, in which the nations of the world are scrambling to secure energy resources for the 21st century.

With this in mind, the time for the United States to be making the required investment in "oil shale" development is now, today, immediately, with a "what-in-the-hell-are-we-waiting-for" sense of urgency. America should be approaching the issue of its future energy needs with the intensity of the Manhattan Project of the Second World War, or if that is too harsh a comparison for you, then with the same full-bore level of effort that went into Project Apollo of the 1960s.

I mean, how clear does it have to be? Now that Peak Oil has made it into The New York Times, perhaps the United States will have a national debate and then actually do something to secure its own energy future. But this is another subject, for more articles in the future.

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